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Deal with Suzuki on Maruti selloff 'round the bend'

BS Economy Bureau

A final decision on the divestment at Maruti Udyog eluded the government on Wednesday even as officials maintained that an agreement acceptable to both Japan's Suzuki Motor Corporation and the Indian government was round the corner.

A high-level Suzuki team was in the capital on Wednesday for a final round of discussions with the government over issues such as renunciation and control premia to be paid by the Japanese auto giant for management control in the joint venture, and the composition of the company's new board.

A Japanese team led by Suzuki board member and a close associate of Osamu Suzuki's family, Nikamasi, was believed to have held closed-door discussions with the ministry of divestment officials on Wednesday.

Suzuki is believed to have agreed in-principle to acquire the Indian government's portion of fresh equity shares in Maruti through a proposed Rs 4-billion rights issue.

The government would get a renunciation premium for having its shareholding diluted to about 40 per cent from just under 50 per cent at present.

In addition, Suzuki would also pay a control premium for gaining management control of the company.

The exact amount of the premium to be paid to the Indian government is being worked out by the negotiating teams from the two sides.

Later, the government will further reduce its shareholding in the company through an initial public offer.

Banks and financial institutions, who decided against picking up the government's share of the equity on offer in the rights issue, would be allowed to participate in the public issue along with retail investors.

The other key issue being discussed was government representation on the Maruti board post divestment.

Under the present arrangement, the two partners have an equal representation on the board. Suzuki has its nominee as the chairman of the joint venture company, while the government appoints the managing director, alternately.

Once the agreement with Suzuki is worked out, the ministry of divestment would approach the Cabinet for the proposed scheme.

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